David Easton's Political System

David Easton (1917-2014) is best know for the application of systems theory to political science. His definition of the Political System (above) as "..the authoritative allocation of values for the society," has had a deep influence on political science.  Unfortunately, I have struggled with the definition of inputs and outputs. I think I have finally come to a resolution, but let me work through the steps in this post. 

My first struggle was where to put the economy in this system: is it an input or an output? In Marxist thinking, the material conditions created by the Economy drive the Political System. In Keynesian thinking, decisions made in the Political System drive the economy. In reality, it is probably both. 

Typically, I take Economic Growth as an input and Financialization (FINZ) as an output because I have empirical support that the two are separate components (see the USL20 Measurement Model below).

The next output that fell into place was Hardship (HARD). An article in the Medium by Cory Doctrow Good Politics just makes People's Lives Better suggested to me that a political system that did not reduce hardship (HARD) could not survive. Other output, such as DEBT and Austerity (AUST) were suggested by Neoliberalism. Finally, Environmental concerns (ENV) and policy programs such as the Green New Deal (GREEN) would also be considered outputs of the Political System.

Since I have indexes for each of these outputs (FINZ, HARD, DEBT, AUST, GREEN and ENV) in addition to an index for the World System (WL20 Measurement Model below), it is at this point that the Political System came together for me. It should also be clear that this is just a partial list; Political System outputs can be whatever issues or programs generate government funding or legislative action. My only constraint is that I be able to create measurable indexes for each output.

And, once inputs and outputs have been defined, Feedback is defined within the framework of Systems Theory (see Blog Roll: Dynamic Components Models).

Notes

USL20 Measurement Model

World System Policy Forecasts for the UK (1960-2100)

 

Notes

See David Easton's Political System for a description of Policy Inputs and Outputs.

Policy Wedges and State Space Simulation Models

 

Policy Wedges first gained attention as Climate Stabilization Wedges. However, the application is broader and has been applied to Monetary Policy Wedges and Health Care Policy Wedges. The idea can be applied to any macro-policy agenda using State Space models.

George W. Pasdirtz’s “Policy Wedges” Approach to U.S. Health Care

George W. Pasdirtz’s 2007 paper “Controlling the US health care system with policy wedges” 

proposes a state-space modeling framework to address the long-term growth of the U.S. 

health care sector, which has expanded faster than the economy Springer+1.

Core Methodology

Pasdirtz developed two state-space models:

U.S. economy model (1950–1999)

U.S. health care system model (1950–1999)

The economy model’s output was used as a reference input to control the health care model’s 

growth. This allowed him to simulate a “controlled” scenario where health care growth matched 

economic growthSpringer.

Policy Wedges

A policy wedge refers to a targeted intervention that shifts the growth path of the health care 

system toward the economy’s growth rate. Pasdirtz’s simulations showed that over the late 20th 

century, the U.S. health care system grew faster than GDP, with health care spending as a share 

of GDP rising from 3.4% in 1950 to nearly 14% in 1999 Springer.

To align health care growth with the economy, his model suggested:

13% reduction in capital expenditure
15% reduction in drug prices
32% reduction in physician service prices Springer+1

These wedges represent policy levers—changes in investment, pricing, and service delivery—

that could slow health care growth without eliminating care.

Designing Universal Health Care

Pasdirtz also applied the framework to universal health care design:

Use planning and economic incentives rather than over-engineering benefits

• Avoid centralized, command-and-control approaches
• Balance coverage and cost control through targeted interventions Springer+1

Key Takeaways

Policy wedges are measurable, targeted interventions to slow health care growth.
They can be applied to both cost control and universal coverage design.

The approach combines macroeconomic modeling with policy simulation to test 

counterfactual outcomes.

It offers a data-driven alternative to ad hoc or politically charged reforms.

In short, Pasdirtz’s “policy wedges” framework provides a quantitative, simulation-based 

roadmap for aligning health care growth with economic growth, with practical implications 

for both cost containment and universal coverage policy.

UKL20 Financialization Dynamics

 

Notes

• A Green New Deal First Report of the Green new Deal Group
• Stern Review (2006): The Economics of Climate Change
• The Global Justice Report A plan for equality and prosperity within Planetary boundaries.
• Kalman, R.E. (1980) A system-theoretic critique of dynamic economic models.

UKL20 FINZ Codes

UKL20 FINZ US Model

UKL20 FINZ BAU Model

UKL20 FINZ BAU Model Stabilized

UKL20 FINZ EU Model

UKL20 FINZ Models AIC Statistics

What Should the Labor Party Do?

From Google AI:

The above graphic shows a very long list of things for the Labor Party to do in the future. If the list becomes larger or proves unwieldy, BAU is probably the best prediction for the future. Another option is for the Labor Party to begin preparing for a Steady-State Economy. Unfortunately, such a policy agenda is likely not realistic and will always be associated with Economic Stagnation.

 

UKL20 Hardship Dynamics

 

While Britain was part of the EU (1973-2020), there was a long-run increase in Hardship (see the Hardship Measurement Model below and the Phase Space above) that started to stabilize after 1990. However, as the systems (both Britain and the EU) approach a steady state, there will be increasing cycles of Hardship that are characteristic of Steady-State Economies at equilibrium.

Cycles of Hardship, if they are allowed to happen, will be interpreted as Political Failure and will result in Political Instability.

You can run the UKL20 Model using R-code on my Google Site. The model is an unstable, Moving Equilibrium model that can be easily stabilized (see instructions in the code). For more of my posts on Great Britain, see Blog Roll: The United Kingdom. For more information about how the State Space models see Blog ROll: Dynamic Component Models. FOr more information about data sources and Systems Theory, see the Boiler Plate.

Notes

Kalman, R.E. (1980) A system-theoretic critique of dynamic economic models.

Hardship Measurement Model (HARD)

Where data were available in the World Development Indicators (WDI), the variables above were used to construct three independent components that explain 97.7% of the variation in the indicators.

The first component, HARD1, explained 75% of the variation and was a relatively equal weighting of all the indicators. The second independent component, HARD2, explaining about 20% of the variation, and was a complex Inequality-Male Infant Mortality-Unemployment, Household Expenditure historical controller. The third independent component, HARD3, was a Family Work-Inequality-Male Infant Mortality historical controller that explained 3% of the remaining variation for a total of 97.7% of the variance explained using Principal Components Analysis (PCA).

From the time plots, all the components were stabilizing by 2014.

UKL20 HARD Model